Mifid II  

Mifid II call recording rules may affect all financial advisers

Mifid II call recording rules may affect all financial advisers

Call recording requirements under the Markets in Financial Instruments Directive II will become mandatory for all areas of financial advice, LifeQuote has claimed.

According to Neil McCarthy, sales and marketing director for Lifequote, the recent announcement that Mifid II will require all investment advice that is provided over the phone to be recorded, will be replicated elsewhere in financial advice, including mortgage, pension and protection.

Currently, under Mifid II rules, which are expected to come into force on 3 January 2017, anyone making a call in which they recommend products or aim to make a 'transaction' will have to record that call and save the recording for five years.

Although initially the regulations will only apply to investments, Mr McCarthy warned the generic regulatory requirements for all financial services have followed a similar line, whether personal lines insurance, mortgages or protection.

Mr McCarthy said: "I’m a little surprised  it has taken until now to make it mandatory for any telephone based investment advice to be recorded.

"I also expect this to become a requirement for many other areas of advice in the future, especially as more advisers and insurers offer remote offerings.

"Disputes do happen and without the record of what was said, it’s one's word against another. In protection advice deliberate non-disclosure or typically lack of disclosure does happen."

He commented that LifeQuote introduced 100 per cent call recording more than nine years ago in the expectation it would become a mandatory requirement for advisers.

Mr McCarthy added: "While the focus of the recent press comments have been about consumer protection, the recording of the application data by a third party does give the adviser protection over any errors in completing an application form, that may lead to a dispute at a future claim. 

“The biggest challenges for advisers, unless they choose to outsource client follow-up, will be cost and complying with data protection regulations.

"As society becomes more litigious, I personally feel this should be adopted in advice scenarios wherever possible, and not just investment related advice as it really does protect the adviser as well as the consumer.”

David Heffron, financial regulation expert for law firm Pinsent Masons, said: "This does not come as a real surprise but the impact for smaller firms could be significant.

"Certainly, it's yet another thing for them to deal with. The argument that there was no customer benefit bearing in mind existing suitability requirements certainly had some force but the FCA’s hands are tied, unfortunately."

In July 2015, the FCA admitted it had been against the recording of calls as proposed under the European Union directive, but had to admit defeat as the recommendation was approved. 

At a Tax Incentivised Savings Association meeting in 2015, Stephen Hanks, FCA Mifid co-ordinator, told attendees the regulator had "lost the debate" on call-recording under the Mifid II proposals.